In the late 1920s, almost the only houses that existed in Malibu were in the burgeoning Malibu Colony, where a new movie star retreat far from Hollywood was all the rage. Throughout the next generation, more beach homes were built as the original Rindge-Adamson family sold off parts of their Malibu coastline and the growing Southland population found respite from the heat at the beach.
During the 1950s, probably 80 percent of the homes that existed in Malibu were on the sand. That percentage has steadily declined.
As virtually all the buildable lots on the water have been improved with homes or businesses, a cap has been reached on the possible supply to the public, at least in the Malibu area (and virtually everywhere within 80 coastal miles of downtown Los Angeles). While the number of homes erected inland continues to grow, the beach is finished; fully built out.
Malibu has only about 20 percent to 25 percent of its homes, within the 90265 ZIP code, that sit on the sand in 2011. As more homes get built on the landside, however, gradually, the percentage will eventually fall to below 20 percent.
But that is just the number of homes that exists. The number of homes for sale is a different story. And therein awaits special opportunity for potential buyers.
In March 2005 only 23 beach homes in all of Malibu were listed in the local Multiple Listing Service for sale. Now there are 90. The inventory on the beach has steadily risen from that remarkable dearth that existed for six years. Prospective beach buyers may have noticed. By August 2006, the tally topped 50. Last summer, it surpassed 60. And this year it has leaped upward, from 64 in January to 90 currently.
If buyers need to have a bell ringing to let them know when trends are in their favor, plenty of cows and church steeples are in their front yards right now. More sellers on the market mean more competition and more pressure on prices to bid downward.
That does not mean that buyers do not have their own competition among them. However, through half of 2011, it isn’t much. Compare the number of beach sales in Malibu in recent years: 2005-58 beach sales; 2006-35; 2007-49; 2008-30; 2009-23; 2010-37; 2011, so far,-11.
The measurement of demand is the number of buyers actually committing to a completed purchase. If the pace so far this year continues, less than 25 beach homes will sell in Malibu, out of approximately 1,000 or so that exist.
For prospective buyers, there are two favorable trends. The scarcity of beach properties will only increase as the percentage of beach homes that exist, compared to all homes, decreases. Furthermore, supply-demand currently favors buyers. Which is more attractive? A period like 2005 when 23 homes were on the market at one time, fighting for 58 buyers that year? Or 2011 when 90 homes are on the market, fighting for perhaps 25-30 buyers that may buy this year?
(Only eight homes have been reported as sold in Malibu at the mid-year point, according to the local MLS. However, three other private sales are also publicly recorded.)
It would seem that many investors only need to simply snap their fingers and come up with the money or loan to make a beach purchase. Ah, but therein lies the rub. And therein lies part of the explanation for the rosy dynamics described above. This ever more bulging opportunity is met with an ever higher standard to qualify to make such a high-end purchase. Certainly, many more than 25 individuals this year would love to buy a beach house in Malibu. Perhaps that is all that can afford to?
Then again, “afford to” is partly a subjective evaluation, based on motivational factors as well. With the huge gap between traditional supply and demand numbers supporting buyers, and price movements likely to reflect those realities, the register of ready, willing and able beach buyers may adjust to the trend.
Rick Wallace has been a Realtor in Malibu for 23 years.